Opinion
21-P-724
07-21-2022
ROANN COSTIN v. JAMES N. BAILEY.
Summary decisions issued by the Appeals Court pursuant to M.A.C. Rule 23.0, as appearing in 97 Mass.App.Ct. 1017 (2020) (formerly known as rule 1:28, as amended by 73 Mass.App.Ct. 1001 [2009]), are primarily directed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, such decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 23.0 or rule 1:28 issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent. See Chace v. Curran, 71 Mass.App.Ct. 258, 260 n.4 (2008).
MEMORANDUM AND ORDER PURSUANT TO RULE 23.0
This appeal arises from a contempt action brought by James N. Bailey (husband) in the Probate and Family Court, alleging that his former wife, RoAnn Costin (wife), violated the terms of their separation agreement by refusing to reimburse him for one-half of their 2016 income taxes paid prior to the divorce. The wife appeals from (1) so much of the order dated July 16, 2019 as (a) allowed in part the husband's motion for summary judgment and (b) denied in part the wife's cross motion for summary judgment on the husband's complaint for contempt; (2) an October 14, 2020 judgment on the husband's complaint for contempt; and (3) a December 18, 2020 supplemental judgment. We reverse so much of the July 16, 2019 order as allowed in part the husband's motion for summary judgment. We vacate the judgments and remand the case for further proceedings consistent with this memorandum and order.
Background.
In August 2013, after thirty-two years of marriage, the wife filed a complaint for divorce. Over the next four years, the parties, with the assistance of divorce counsel, engaged in negotiations to divide the sizable marital estate and settle their other financial matters. On November 13, 2017, the parties executed a sixty-six page separation agreement, which was incorporated into, but not merged with, the divorce judgment. The agreement thereby survived the judgment and retained independent legal significance as a contract. See DeCristofaro v. DeCristofaro, 24 Mass.App.Ct. 231, 235 (1987) .
Exhibit C of the agreement, entitled "TAX AND INDEMNIFICATION MATTERS," contained six numbered paragraphs addressing the parties' obligations relative to their income taxes. Relevant here are paragraphs 1, 4, and 5 of Exhibit C, which provided that:
"1. The parties have filed joint federal and state income tax returns for tax year 2016. Fees relating to the preparation of their 2016 tax returns and federal, state, and local total income tax for that year shall be shared equally by the parties. If there are any additional taxes determined later to be due for 2016 the parties shall share equally any such 2016 income tax liabilities/penalties. Any income tax overpayment or refunds on any jointly filed tax returns (from any year) shall be shared equally by the parties. To the extent that either the Husband or the Wife has applied or received more than his or her respective share of any income tax overpayments or refund, the party in receipt of such excess overpayment or refund shall remit
to the other such amount within ten (10) business days of such determination.
4. Each party hereby represents and warrants to the other that he or she, to his or her knowledge, has duly paid all federal and state income taxes attributable to him or her on all joint returns heretofore filed by the parties, that to his or her knowledge no interest or penalties are due or owing with respect thereto, no tax deficiency proceeding is pending or threatened by a taxing authority with respect thereto, and no audit thereof is pending other than the currently pending federal audits for 2012-2014, Massachusetts audit for 2013 and 2014, and New York state audits for 2012-2014 of which both parties are aware.
5. If there is a deficiency assessment or notice of any audit in connection with any and all joint returns filed by the parties (including those audits now pending), the party first notified thereof shall inform the other immediately in writing. The parties shall share equally any and all tax liability(ies) and any and all costs associated with any such deficiency assessment or audit, including accounting and legal fees."
The parties jointly filed their 2016 tax returns on or about October 11, 2017, approximately one month before executing the separation agreement. As of July 2017, they had paid a total of $8,254,170 toward their 2016 Federal, State, and local income taxes, in the following amounts: (1) $989,208 in overpayment from their 2015 taxes; (2) $664,962 in traditional and excess Federal withholding; (3) $1.8 million in estimated payments; and (4) $4.8 million paid with the request for an extension. Of the $6.6 million in direct payments, which were made between December 2016 and July 2017, $6.5 million was paid through an account held in the husband's individual name and $100,000 was paid through an account held in the wife's individual name.
In July 2018, the husband filed a complaint for contempt, alleging, inter alia, that the wife had failed to reimburse him in the amount of $4,076,924.50, representing her one-half share of the parties' 2016 taxes paid from the husband's account. In her answer to the husband's complaint for contempt, the wife asserted that there was nothing in the agreement requiring her to reimburse the husband because "all of the taxes due for the parties' 2016 federal joint tax returns were equally paid by the parties from the marital estate . . . prior to the execution of their Separation Agreement on November 13, 2017. Acknowledgement of same is also contained in Exhibit C, Paragraph 4 of the parties' Separation Agreement."
The parties thereafter filed cross motions for summary judgment. In his motion, the husband argued that the separation agreement clearly and unambiguously required the wife to reimburse him for her one-half share of their 2016 income taxes paid prior to the agreement's execution. Following a nonevidentiary hearing, a judge of the Probate and Family Court (motion judge) issued an order on July 16, 2019, granting partial summary judgment in the husband's favor.
The motion judge also granted partial summary judgment in the wife's favor on an issue not relevant to this appeal.
The motion judge determined, as a matter of law, that the separation agreement required the wife to reimburse the husband for her share of the 2016 taxes that were paid prior to executing the agreement. The motion judge concluded that the language contained in paragraphs 1 and 5 of the Exhibit C was "clear, unequivocal and unambiguous," and reasoned that paragraph 1 "clearly states that the parties filed their 2016 taxes. However, the [a]greement contains further language that the parties are to share equally all tax obligations related to their 2016 tax filings, including those already assessed and additional assessments." The motion judge agreed with the husband's interpretation that "the [a]greement noticeably and unquestionably invoked the past tense in describing the filing of the tax returns [for 2016] and the future tense words 'shall be' to connote an obligation not yet fulfilled to share equally the 2016 total taxes and fees." Concluding that the agreement on its face "contemplated future financial obligations of the parties as it relates to the 2016 taxes," the judge determined that the wife was obligated to reimburse the husband for her share of the 2016 taxes already paid. The amount actually owed by the wife remained disputed, however, and the judge ordered an evidentiary hearing on that issue.
Thereafter, in December 2019, the parties stipulated to the following uncontested facts, which they submitted in lieu of an evidentiary hearing. With respect to their 2016 taxes, the parties agreed that (1) their total income tax obligation was $6,483,832; (2) a total of $8,254,170 had been paid prior to the divorce, which amount included the 2015 overpayment, Federal withholding, and $6.6 million in direct payments (consisting of $6.5 million paid from the husband's account and $100,000 paid from the wife's account); (3) no amounts were due at the time of the agreement's execution on November 13, 2017; and (4) no assessments were made after they filed their tax returns in October 2017. A final hearing on the husband's complaint for contempt was held before a different judge (second judge), who issued a judgment on October 14, 2020, followed by a supplemental judgment on or about December 18, 2020. The second judge incorporated the motion judge's ruling that the agreement unambiguously obligated the wife to reimburse the husband for her share of the 2016 taxes paid prior to the divorce, but declined to hold the wife in contempt because "there was no clear command as to either the amount or payment terms." Although the second judge found the wife not guilty of contempt, she ordered the wife to pay (1) $2,647,312 for her one-half share of the parties' 2016 total income taxes (one-half of $6,483,832, less her cash payment for 2016 and her share of the 2015 overpayment); and (2) a portion of the husband's counsel fees, in the amount of $95,115. The present appeal by the wife followed.
Discussion.
The wife principally contends that the motion judge erroneously interpreted the parties' separation agreement as requiring the wife to reimburse the husband for one-half of the 2016 income taxes paid prior to the execution of the separation agreement. The wife also contends that the second judge improperly awarded attorney's fees to the husband despite finding the wife not guilty of contempt. We address the wife's contentions in turn.
1. Interpretation of separation agreement.
"The interpretation of the separation agreement is a question of law, and is therefore afforded plenary review" (quotation and citation omitted). Colorio v. Marx, 72 Mass.App.Ct. 382, 386 (2008). See Balles v. Babcock Power Inc., 476 Mass. 565, 571 (2017) (interpretation of contract language is question of law we review de novo). We must construe the agreement based on "a fair construction of the contract as a whole and not by special emphasis upon any one part" (citation omitted), Kingstown Corp. v. Black Cat Cranberry Corp., 65 Mass.App.Ct. 154, 158 (2005), while also recognizing that "every word is to be given force so far as practicable" (citation omitted). MacDonald v. Hawker, 11 Mass.App.Ct. 869, 872-873 (1981). "[W]hen the language of a contract is clear, it alone determines the contract's meaning." Balles, supra. Where, however, the words of a contract are ambiguous, the court may consider extrinsic evidence to ascertain the parties' intent. Id.
The determination whether the contractual language contains an ambiguity presents a question of law for the court. See Bank v. Thermo Elemental Inc., 451 Mass. 638, 648 (2008). "Contract language is ambiguous 'where the phraseology can support a reasonable difference of opinion as to the meaning of the words employed and the obligations undertaken'" (citation omitted). Id. "The mere existence of the parties' disagreement does not make the language ambiguous." Browning-Ferris Indus., Inc. v. Casella Waste Mgt. of Mass., Inc., 79 Mass.App.Ct. 300, 307 (2011). Rather, "[a]n ambiguity arises from language susceptible of different meanings in the eyes of reasonably intelligent persons." I_d. "To answer the ambiguity question, the court must first examine the language of the contract by itself, independent of extrinsic evidence concerning the drafting history or the intention of the parties." Bank, supra. See Robert Indus., Inc. v. Spence, 362 Mass. 751, 755 (1973) (words of agreement remain most important evidence of intention). "In the absence of case law, established dictionaries can furnish the approved natural meaning of disputed terms." Suffolk Constr. Co. v. Illinois Union Ins. Co., 80 Mass.App.Ct. 90, 94 (2011).
Here, both parties contend, as they did below, that the language of Exhibit C is unambiguous, however, they disagree as to its meaning. The husband's interpretation, which the motion judge agreed with, hinges on the second sentence of paragraph 1 of Exhibit C, which provides, in relevant part, that "federal, state, and local total income tax for [2016] shall be shared equally by the parties" (emphasis added) . The husband asserts that the phrase "shall be shared" connotes a future, as yet unfulfilled obligation on the part of the wife, to contribute one-half of the payment for the parties' 2016 income taxes. The established dictionary definitions for "shall" and "shared" support the husband's interpretation of the second sentence of paragraph 1. See Black's Law Dictionary 1653 (11th ed. 2019) (defining [1] "shall" as "[h]as a duty to," "is required to," or as equivalent to "[w]ill (as a future-tense verb)"; and [2] defining "share" as "[a]n allotted portion . . . contributed by, or due to someone"). See also Webster's Third New International Dictionary 2085 (2002) (defining "shall" as expressing "a command or exhortation" or what is "inevitable or . . . decreed or likely to happen in the future").
The wife, however, contends that paragraph 1 cannot be read in isolation, as other provisions of the agreement contain crucial terms that must be read together to ascertain the parties' intent. See General Convention of the New Jerusalem in the United States of Am., Inc. v. MacKenzie, 449 Mass. 832, 835 (2007) ("The words of a contract must be considered in the context of the entire contract rather than in isolation"); Computer Sys. of Am., Inc. v. Western Reserve Life Assur. Co. of Ohio, 19 Mass.App.Ct. 430, 437 (1985) ("every word and phrase of a contract should, if possible, be given meaning, and . . . none should be treated as surplusage if any other construction is rationally possible").
Specifically, the wife points to paragraph 4 of Exhibit C, which provides, in relevant part, that "[e]ach party . . . has duly paid all federal and state income taxes attributable to him or her on all joint returns heretofore filed by the parties" (emphasis added). The wife argues that the foregoing language set forth in paragraph 4, coupled with the first sentence of paragraph 1 acknowledging that the parties had already filed their 2016 tax returns, unambiguously reflects their understanding that they had each already fulfilled their obligation to share equally in all 2016 income taxes paid prior to the execution of the agreement, and that their future obligation was limited to sharing equally in any assessment of additional taxes beyond those already paid.
The wife's interpretation of paragraph 4 finds support in the established dictionary definitions for "duly," "paid," and "heretofore." See Black's Law Dictionary 633, 874 (11th ed. 2019) (defining [1] "duly" as "[i]n a proper manner ... in accordance with legal requirements," and [2] "heretofore" as "[u]p to now; before this time"); Webster's Third New International Dictionary 1620 (2002) (defining "paid" as having made "any agreed disposal or transfer [of money]"). The wife's interpretation also finds support in other language contained in Exhibit C: the third, fourth, and fifth sentences of paragraph 1 only reference the parties' obligations to share equally in any future refunds or deficiencies, and paragraph 5 only mentions their obligations regarding future deficiencies.
Moreover, there is no explicit mention of any duty of the wife to reimburse the husband for the 2016 taxes already paid. Cf. Computer Sys. of Am., Inc., 19 Mass.App.Ct. at 437 ("if the parties had intended at-will termination, they could have said so . . . expressly"). The wife asserts that, in viewing the separation agreement as a whole -- including the language in paragraph 4 of Exhibit C -- together with the rest of a "very detailed" agreement that "contained precise values, and provided specific timeframes for when assets would be divided and liabilities paid," it is "inconceivable" that the parties would have failed to include similarly precise values and a specific repayment timeframe if they intended for the wife to reimburse the husband for her share of the 2016 taxes already paid prior to executing the agreement.
Although each party's interpretation is plausible, we conclude that "[n]either party's interpretation of [Exhibit C] commends itself to us to the exclusion of the other . . . and the agreement[ ] by [itself] do[es] not reveal an answer to the question at issue .... This is the essence of ambiguity." President & Fellows of Harvard College v. PECO Energy Co., 57 Mass.App.Ct. 888, 895-896 (2003). We think "[t]he text leaves enough room for reasonable disagreement," Browning-Ferris Indus., Inc., 79 Mass.App.Ct. at 308, and therefore conclude that Exhibit C is ambiguous as applied to the parties' 2016 incomes taxes paid prior to the agreement's execution. See Suffolk Constr. Co. v. Lanco Scaffolding Co., 47 Mass.App.Ct. 726, 729 (1999) (language ambiguous if facially inconsistent or capable of supporting reasonable difference of opinion as to meaning of words employed and obligations undertaken). "Once a contractual ambiguity emerges, the meaning of the uncertain provision becomes a question of fact for the trier." Browning-Ferris Indus., Inc., supra at 307.
Because the agreement is ambiguous, evidence is required to determine the parties' intent. See Sullivan v. Southland Life. Ins. Co., 67 Mass.App.Ct. 439, 440 (2006) (summary judgment proper only when contract is unambiguous); Parrish v. Parrish, 30 Mass.App.Ct. 78, 86 (1991) (extrinsic evidence regarding background and purposes of parties, and their understanding of meaning of particular language, may be considered in construing ambiguous contractual language). The matter must, therefore, be remanded for an evidentiary hearing to determine the parties' intent regarding the 2016 income taxes paid prior to the agreement's execution. See President & Fellows of Harvard College, 57 Mass.App.Ct. at 889, 896-897.
2. Attorney's fees.
The second judge ordered the wife to pay a portion of the husband's attorney's fees in the amount of $95,115, finding it "equitable that some of the [husband's] attorney's fees and costs be reallocated . . . [because] at least as of January 2020, [the wife] had full knowledge of the net calculation of her equal share of the 2016 taxes." It is apparent that the fee award necessarily flowed from the determination that the agreement unambiguously required the wife to reimburse the husband for the already-paid 2016 taxes. Accordingly, the fee award must be vacated.
The separation agreement provided that, in the event of a party's default or breach, the other party may seek enforcement of the agreement and shall be "reimbursed for reasonable attorneys' fees, costs, and expenses incurred as a result of such default or breach."
Conclusion.
So much of the order dated July 16, 2019 allowing in part the husband's motion for summary judgment is reversed. The judgment dated October 14, 2020, and the supplemental judgment dated December 18, 2020, are vacated, and the case is remanded for further proceedings consistent with this memorandum and order.
The parties' requests for appellate fees and costs are denied.
So ordered.
Milkey, Sullivan & Ditkoff, JJ.
The panelists are listed in order of seniority.